Many business owners start their companies with good intentions. They register with SARS, begin trading, and focus on growing their businesses. However, as time passes, accounting records fall behind, tax returns are not submitted, and SARS compliance becomes an overwhelming problem.
If your company has not submitted tax returns for months or even years, you are not alone. We regularly assist companies that have outstanding tax returns and are unsure how to correct their compliance status.
The good news is that the problem can usually be resolved. The worst thing you can do is ignore it.
Why Companies Fall Behind
There are many reasons why companies stop submitting tax returns:
- Poor bookkeeping and record-keeping
- Cash flow challenges
- Loss of financial records
- Changes in management
- Lack of accounting support
- Believing that a dormant company does not need to submit returns
- Fear of dealing with SARS after falling behind
Unfortunately, SARS does not simply forget about outstanding returns.
What Happens When Tax Returns Are Not Submitted?
1. SARS May Impose Administrative Penalties
When returns are not submitted, SARS may impose penalties and interest. These amounts can accumulate over time and become a significant financial burden for the company.
What starts as a missed return can eventually become a substantial debt.
2. Your Company May Become Tax Non-Compliant
A company with outstanding tax returns will often lose its tax compliant status.
This can create serious business challenges, including:
- Difficulty applying for tenders
- Problems obtaining funding
- Challenges dealing with customers who require proof of tax compliance
- Reputational damage
Many businesses only discover this problem when they urgently need a Tax Compliance Status (TCS) Pin.
3. SARS May Estimate Your Tax Liability
If SARS does not receive the required tax returns, it may issue estimated assessments based on the information available to it.
These assessments are often higher than the actual tax liability and can result in unexpected tax debt.
4. Collection Action May Follow
Where tax debt exists, SARS has extensive powers to collect outstanding amounts.
Depending on the circumstances, collection actions may include:
- Final demand notices
- Third-party appointments
- Collection measures against bank accounts
- Other debt recovery processes permitted by law
Ignoring the problem does not make it disappear.
5. Directors Face Increased Risk
Directors have a responsibility to ensure that the company meets its legal and tax obligations.
Persistent non-compliance can expose the business to unnecessary risks and may affect future growth opportunities.
What Should You Do If Your Company Has Outstanding Tax Returns?
The first step is not to panic.
Most tax compliance issues can be resolved with a structured approach.
Step 1: Determine Which Returns Are Outstanding
Conduct a SARS compliance review to identify:
- Outstanding Income Tax Returns
- VAT Returns
- PAYE Returns
- SDL Returns
- UIF Returns
Many companies are surprised to discover that multiple return types are outstanding.
Step 2: Reconstruct Accounting Records
Where records are incomplete, they may need to be reconstructed using:
- Bank statements
- Invoices
- Supplier records
- Payroll records
- Accounting software data
This process forms the foundation for accurate tax submissions.
Step 3: Submit Outstanding Returns
Once the records have been prepared, the outstanding returns can be submitted to SARS.
The objective is to bring the company back into compliance as quickly as possible.
Step 4: Review Assessments and Penalties
After submission, any assessments, penalties, or interest charges should be reviewed.
In some cases, there may be opportunities to correct assessments or request relief where appropriate.
Step 5: Implement a Compliance System
The final step is ensuring the problem does not happen again.
This includes:
- Monthly bookkeeping
- Payroll administration
- Tax compliance monitoring
- Annual tax planning
- Ongoing SARS compliance reviews
The Cost of Waiting
Many business owners postpone dealing with tax compliance because they fear the outcome.
Unfortunately, delays usually make the problem worse.
The longer returns remain outstanding:
- The more difficult records become to recover
- The higher penalties and interest may become
- The greater the risk of enforcement action
- The more difficult it becomes to restore compliance
Addressing the issue early generally leads to better outcomes.
How Next Generation Accountants Can Help
At Next Generation Accountants, we help South African companies get compliant and stay compliant with SARS.
Our services include:
- Outstanding Tax Return Submissions
- SARS Compliance Reviews
- VAT Compliance
- PAYE Compliance
- Tax Debt Assistance
- Accounting and Bookkeeping Services
- Tax Compliance Status Restoration
If your company has not submitted tax returns for years, now is the time to act.
The sooner the problem is addressed, the sooner your business can return to good standing and focus on growth.
Need Help?
Contact Next Generation Accountants for a Compliance Health Check and let us help you restore your company’s SARS compliance status. Call or WhatsApp: 081 435 4234
